Medicare Part B:

Regional Variation in Denial Rates for Medical Necessity

PEMD-95-10: Published: Dec 19, 1994. Publicly Released: Dec 19, 1994.

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Pursuant to a congressional request, GAO reviewed Medicare Part B claims processing, focusing on the: (1) differences in carriers' denial rates for lack of medical necessity; and (2) factors that contribute to intercarrier variations in denial rates.

GAO found that: (1) in 1992 and 1993, denial rates for lack of medical necessity for 74 expensive or heavily utilized services were generally low, but the six carriers reviewed varied significantly in their denial rates; (2) denial rates for the 74 services varied from zero to over 100 per 1,000 services allowed; (3) in general, the carriers' denial rates remained stable for two-thirds of their services in 1992 and 1993; (4) the Medicare program has traditionally allowed carriers to include regional variations in medical practice standards in their criteria for determining allowable claims; (5) the Health Care Financing Administration (HCFA) has developed initiatives to promote consistency in medical policy across carriers; and (6) variations in carrier denial rates stemmed from carriers' differing prepayment screens, varying interpretations of certain national coverage standards, carriers' differing treatment of incomplete claims, and reporting inconsistencies.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: No action has been taken.

    Recommendation: To improve its oversight of the Medicare Part B program, HCFA should issue instructions to carriers on how to classify the reason for denial when reporting this information.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Not Implemented

    Comments: No action has been taken.

    Recommendation: To improve its oversight of the Medicare Part B program, HCFA should analyze intercarrier screen usage (including the stringency of screen criteria), identify effective screens, and disseminate this information to all carriers.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  3. Status: Closed - Not Implemented

    Comments: No action has been taken.

    Recommendation: To improve its oversight of the Medicare Part B program, HCFA should direct carriers to profile the subpopulation of providers responsible for a disproportionate share of medical necessity denials in order to devise a strategy for addressing this problem.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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